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Third party motor insurance premium will go up significantly from April 1, as per the proposals of the Insurance Regulatory and Development Authority of India (IRDAI).
In an exposure draft on the proposed hike, the regulator has indicated that the increase would be in the range of about 15 per cent to over 100 per cent for different category of vehicles on account of a high increase in the average death claim size for 2013-14 over the previous year.
For small private cars (less than 1,000 cc), the regulator has proposed a sharp hike of 107.79 per cent hike in third-party insurance premium and for cars over 1,000 cc but not exceeding 1,500 cc the increase is 44 per cent. So, for a small car, the vehicle owner may have to pay a premium of ₹2,346 in April from the current ₹1,129.
Every year, in April, the insurance regulator revises the third-party premium rates for all classes of vehicles based on an actuarial formula, which takes into account the loss ratios for insurers, inflation, higher awards by judiciary, and other factors.
Death claims risingThere is big “increase in average death claims size for FY 2013-14 over the previous year, and the increase in average death claim size for the claims arising out of the policies issued in the years 2014-15 and 2015-16 (that would be settled over next 8-10 years) is expected to be much higher,” said the regulator in the draft.
The average size of third-party claims rose 12 per cent in 2013-14 to ₹6,09,152 from ₹5,45,174.
In the case of trucks (public carrier), third-party premium is proposed to be reduced by around 14 per cent for vehicles with gross vehicle weight (GVW) not exceeding 7,500 kg and 20 per cent for vehicles with GVW of over 7,500 kg but less than 12,000 kg.
Up and down for 2-wheelersThe premium increase for two-wheelers is in the range of 14-32 per cent for vehicles with engine capacity of 75-350 cc, whereas it has been reduced by around 60 per cent for two-wheelers with engine capacity over 350 cc.
Incidentally last year, while the regulator had initially proposed to hike premium rates for private cars and two-wheelers by 26-137 per cent in its draft circular, the regulator finally lowered the proposed increase to 9-20 per cent in its final circular.
The IRDAI has called for comments on the draft from stakeholders by March 20, 2015.
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